Why it’s cru­cial that mar­ket de­mand ex­ists for your startup

Irish Independent - Business Week - - TECHNOLOGY -

THIS week I’m go­ing to write about the most dif­fi­cult slide in your en­tire pitch deck. This par­tic­u­lar slide out­lines the ev­i­dence that you have a real busi­ness, by show­ing that a mar­ket de­mand ex­ists.

Even if you have a real busi­ness, with real cus­tomers, and real traction, it may not be enough, es­pe­cially for later rounds of fund­ing.

At the seed stage, which is where we are now, un­less you’ve stum­bled upon some­thing won­der­ful, you won’t even have the lux­ury of real, sta­tis­ti­cally sig­nif­i­cant, num­bers.

I should em­pha­sise that you need to be very care­ful here.

I con­sider seed fund­ing to oc­cur mostly at the pre-rev­enue stage. You might have some cus­tom con­sult­ing en­gage­ments, but that’s not re­ally rev­enue that proves the model.

All you’ve done is prove the need in a par­tic­u­lar case. Some in­vestors might want you to have shown some traction on your core busi­ness model be­fore rais­ing a seed round.

This is pos­si­ble if you de­cide to mon­e­tise your Min­i­mum Vi­able Prod­uct (MVP).

Thus, you’ll need to make a strat­egy de­ci­sion long be­fore you start putting to­gether a pitch deck.

Ei­ther you’re go­ing to use fo­cused pilot projects as tri­als to un­der­stand your cus­tomers and gen­er­ate some mar­ket val­i­da­tion, or you’ll open the shop doors as soon as you have any­thing on the shelf, and try to sell as soon as pos­si­ble.

Which strat­egy you choose is de­ter­mined by who pays for your prod­uct.

We are talk­ing about Busi­ness-toBusi­ness Soft­ware-as-a-Ser­vice in this di­ary, as that’s what Voxgig is. I don’t pre­tend to know much about build­ing con­sumer busi­nesses.

If you are tar­get­ing small busi­nesses, or free­lance pro­fes­sion­als, or nar­row func­tions within a busi­ness (say, so­cial me­dia au­to­ma­tion), then I think it makes more sense to mon­e­tise your MVP from the start.

If, like Voxgig, you’re try­ing to build a cross-func­tional so­lu­tion, and a so­lu­tion that will cross or­gan­i­sa­tion bound­aries, then I think it’s bet­ter to fo­cus on pilot tri­als – you re­ally need the deep un­der­stand­ing of the cus­tomer pain points that comes with high-touch en­gage­ments.

The ev­i­dence that you present on your pitch deck to show that there is a growth busi­ness is go­ing to be based partly on the re­sults of these dif­fer­ent strate­gies. In the ‘mon­e­tise-early’ case, you’re re­ally go­ing to need to have good growth in user reg­is­tra­tions and con­ver­sions.

You’re go­ing to want to show how your mea­gre ad­ver­tis­ing bud­get, guer­rilla mar­ket­ing, and en­er­getic hus­tling has de­liv­ered good growth with ob­vi­ous po­ten­tial for more. You may not be at prod­uct-mar­ket fit, but you should be pro­vid­ing some util­ity to your cus­tomers, and be able to show it. Think of the early days of com­pa­nies like Ever­note, Github, and Mailchimp.

We’ve cho­sen the other ap­proach: pri­vate tri­als. That means we don’t have much in the way of ac­tual user num­bers. You won’t even be able to regis­ter on voxgig.com un­til Jan­uary next year.

What you can use are the pilot tri­als them­selves – if you can’t get peo­ple to use your stuff for free, there’s no hope.

You should also be in the process, or at least pre­par­ing, to turn those pi­lots into pay­ing cus­tomers – they did find your prod­uct use­ful, right?

You must how­ever re­main painfully aware that pi­lots (which you prob­a­bly found via your net­work) do not prove your busi­ness model at all.

That only comes later when peo­ple who’ve never met you visit your

web­site and buy from you (which is just a won­der­ful rush, by the way). You men­tion the pi­lots, they do pro­vide some ev­i­dence, but you’ll need more.

The way we’ve ad­dressed this prob­lem is to start our mar­ket­ing ac­tiv­i­ties long be­fore re­leas­ing the prod­uct. That’s why we have the news­let­ter for pub­lic speak­ers and that’s why it was our first ‘prod­uct’.

The growth in sub­scriber num­bers is proxy for de­mand from con­fer­ence speak­ers for bet­ter ways to col­lab­o­rate. Our suc­cess here has led us to dou­ble down on this ac­tiv­ity and we’ll be launch­ing a sec­ond news­let­ter for event or­gan­is­ers and a pod­cast, in a few weeks from now.

This early mar­ket­ing ac­tiv­ity does give us some real ev­i­dence that need ex­ists in the mar­ket. If you are build­ing a more en­ter­prise-level sys­tem, nec­es­sar­ily you’ll be tak­ing longer to get to the point where it can be used at all (all those base-level en­ter­prise fea­tures, like groups and per­mis­sions, need to be built).

Early mar­ket­ing ac­tiv­ity, and I would count our lit­tle search en­gine MVP as part of this, can both help you un­der­stand the mar­ket, and show that it ex­ists.

Per­haps now you see why this slide is the most dif­fi­cult – if you haven’t got the ev­i­dence, then you’re re­duced to putting ‘lip­stick on a pig’. There’s only so much you can do with mar­ket re­search re­ports.

Un­for­tu­nately many tech­ni­cal founders end up in this po­si­tion, where the sys­tem is rel­a­tively com­plete, but there’s still huge mar­ket risk – it may not ex­ist at all.

There is nu­ance here that you should ob­serve: mar­ket risk (will any­one buy?) is not the same as prod­uct risk (does the prod­uct meet the mar­ket need?).

Voxgig has higher prod­uct risk than mar­ket risk at this point in time – have we built the right prod­uct for a mar­ket that we have strong ev­i­dence for?

Our goal in 2019 is to re­move this risk by reach­ing prod­uct-mar­ket fit.

The strate­gies that we have cho­sen in Voxgig are not the only ones you can use to build ev­i­dence.

I’ve been very lucky to pro­vide ad­vice to some great star­tups over the last year, and those founders have used some great ap­proaches.

In one, case, the founder put in many hours par­tic­i­pat­ing in the tar­get on­line com­mu­ni­ties where they would find their cus­tomers, be­com­ing a trusted com­mu­nity leader.

In an­other case, the founder found a way to ser­vice a small fo­cused mar­ket us­ing peo­ple rather than soft­ware, val­i­dat­ing the larger mar­ket.

In both cases, they were fol­low­ing the maxim of Paul Gra­ham (the founder of the ycombi­na­tor startup ac­cel­er­a­tor): do things that don’t scale.

At first you shouldn’t worry about the tech­nol­ogy at all.

First, you should build ev­i­dence that a mar­ket ex­ists.

And you shouldn’t just do this for in­vestors.

Do it for your­self. You’re in­vest­ing so much of your own time, and money (in sav­ing and lost wages), that you also, as founder, need good ev­i­dence that you have a busi­ness.

(News­let­ter up­date: 3,939 sub­scribers, and an open rate of 13pc. We are back on track with im­proved pro­cesses and mea­sure­ment. Good in­ci­dent re­ports lead to great out­comes.)

The pitch: Your pitch deck will need to show how your mea­gre ad­ver­tis­ing bud­get, guer­rilla mar­ket­ing, and en­er­getic hus­tling has de­liv­ered good growth with ob­vi­ous po­ten­tial for more


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